NRRI Colloquium San Francisco, CA 18 November 2014 Municipal Broadband: A Review of Rules, Requirements, and Options
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1 NRRI Colloquium San Francisco, CA 18 November 2014 Municipal Broadband: A Review of Rules, Requirements, and Options Sherry Lichtenberg, Ph.D. Principal Researcher, Telecommunications National Regulatory Research Institute slichtenberg@nrri.org
2 What is a municipal network? Service provided by a government entity; also called a governmentowned network (GON) Municipal utilities Cities/towns There are 4 main types of municipal networks Municipality-owned and managed networks (city networks) providing retail service; Utility networks that provide broadband, telecommunications, and/or other services to their customers using the same model as their electric or other utility service; Public-private partnerships, where a municipality contracts with a private concern to provide broadband services to its residents using infrastructure provided by the municipality. Open access (wholesale) networks, where the city provides the infrastructure and offers it to multiple suppliers to provide retail service. Utility cooperatives also provide broadband 18-Nov-2014 S. Lichtenberg, NRRI 2
3 Municipal Broadband Facts 143 municipal systems in place today across the country Municipal power/water companies City-owned/managed systems Public/private partnerships Some city Wi-Fi networks Majority are fiber based and offer high speed service Exceed the FCC-mandated broadband speed standard of 4 Mbps downstream/1 Mbps upstream 10 municipal systems are in the top speed category as fast or faster than Google Fiber and other ultra high speed offerings There have been both successes and failures Successes include Wilson, North Carolina, EPB in Tennessee, LUS in Virginia Failed systems include iprovo and UTOPIA Stranded assets/subsidy requirements are key concerns 18-Nov-2014 S. Lichtenberg, NRRI 3
4 Proponents of municipal broadband focus on broadband as a public service Municipal systems offer a customer-focused experience Private firms must put shareholder value above customer needs Municipalities know their customers better Speeds are faster and prices are lower Municipalities deploy networks where they are needed, including unserved and underserved areas Municipal networks increase both public and private investment Broadband infrastructure creates new business opportunities Businesses demand high speed networks Municipal networks increase competition Private suppliers increase speed and service to compete Open network design may encourage multiple suppliers 18-Nov-2014 S. Lichtenberg, NRRI 4
5 Opponents cite reduced competition, increased costs, and potential losses Government-owned projects focus too much on public service goals and not enough on good business practices Public service goal may obscure higher costs/reduced profits Providers under price and over promise Municipal networks are often unprofitable Taxpayers must cover increased costs and stranded assets Monies could be better spent on physical infrastructure projects like roads and bridges Municipal providers cannot close the broadband gap Provide service only to those areas where it is profitable to do so Service area is primarily within the city limits and not at the more expensive edges Incumbent companies must continue to serve the rest of the area, causing them to serve a disproportionate share of the higher cost customers 18-Nov-2014 S. Lichtenberg, NRRI 5
6 States have responded to concerns about municipal broadband with entry conditions 4 states prohibit municipal broadband completely Missouri, Nebraska, Nevada, and Texas Rules focus on telecommunications rather than broadband Washington allows wholesale infrastructure only; no retail networks 18 states condition deployment on specific requirements Business plan No subsidies Enter unserved areas only Incumbent carrier right of first refusal 2 municipal systems Wilson, North Carolina, and Chattanooga, Tennessee, have asked the FCC to overturn these conditions Petitioners call for the FCC to use Section 706 to reduce entry barriers and encourage further broadband deployment Respondents question FCC authority and Federalism concerns 18-Nov-2014 S. Lichtenberg, NRRI 6
7 23 states place conditions on municipal networks 18-Nov-2014 S. Lichtenberg, NRRI 7
8 Entry conditions are wide ranging Requirements Unserved areas/no private carrier willing to enter Service limited to municipality Referendum, public hearing Business plan, no subsidies, or tax inducements Wholesale only States CA (Note 1), CO (Note 2), MT (Note 1), PA (Note 2), SC (Note 1), WI (Note 2), WY (Note 2) AL, AR, MA, NC, TN, VA (Note 3 ) AL, CO, FL, LA, MN (Note 4), NH, NC, UT, WI, WY AL, FL (Note 5), IA, LA, NC, NV, SC, UT (Note 6), VA, WI, WY WA Note 1: May discontinue service if competitor enters Note 2: Carrier right of first refusal Note 3: VA svc may extend 75 mi on request Note 4: 65% voters must agree in areas served by an incumbent provider Note 5 : Project must break even in 4 years Note 6: Project must break even in 5 years Author's construct based on state data 18-Nov-2014 S. Lichtenberg, NRRI 8
9 The jury is still out on municipal broadband Managed correctly, municipal systems may be an important tool for increasing broadband adoption Focus on unserved/underserved areas Municipal systems could act as broadband COLRs Oversight could ensure adequate planning and implementation Access to 911, service availability, metrics, USF remain important questions Good business planning is the cornerstone of success Breakeven analysis Accurate forecasts, including contingency plans Limited or no subsidies Focus on the effects of competition Early community support is key driver of success Community meetings/referendums Pre-build sales commitments following the Google model 18-Nov-2014 S. Lichtenberg, NRRI 9
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